ADDIS ABABA, Ethiopia — The world's biggest names in hospitality are battling for a slice of one of the world's fastest-growing markets for hotels: Africa.
Tourists are pouring into many of the continent's 54 nations in record numbers, fueling development in traditional tourist hubs and new investment in frontier markets. The continent boasts the world's fastest-growing population, some of its most swiftly expanding economies and a ballooning domestic-travel market driven by Africa's expanding middle class.
The prospect of bumper growth across dozens of underdeveloped markets—some offering the potential to set higher room rates than in London or New York—is sparking billions of dollars in investments from top operators, including Accor SA, Hilton Worldwide Holdings Inc. and Marriott International Inc. A 2018 survey of 41 hotel chains by W Hospitality Group, an advisory firm, shows 298 hotels in the development pipeline across Sub-Saharan Africa, more than double the pipeline in 2014.
The most robust growth is taking place beyond the continent's established tourism hot spots of South Africa and Kenya in the rising business hubs of Nigeria and Ethiopia. In Addis Ababa, Ethiopia's highland capital, where gross domestic product has grown by 10% on average annually over the past decade, the rising skeleton of a 450-room Four Points by Sheraton is located opposite a Hyatt Regency that opened Jan. 1. The city's new airport terminal has more than doubled annual capacity to 22 million passengers.
“They have good Wi-Fi and good service,” Ibrahim Hamza, a 28-year-old dentist from Addis Ababa, said of the Hyatt while working on a laptop in its lobby on a recent weekday afternoon. “I like the design and the interior—it's unique.” Addis Ababa has become a hub for continental travel via its state-owned Ethiopian Airlines and hosts the headquarters of the United Nations Economic Commission for Africa as well as the African Union.
Investments in hotels in Ethiopia reflect the shifting of economic centers of gravity across the continent. With 31 hotels in the pipeline, according to W Hospitality, Ethiopia is second in Sub-Saharan Africa only to Nigeria.
Revenue in Africa per available room, a performance metric used in the industry, grew by 11% in 2018, faster than in Europe, where it climbed 5.2%, or Asia, where it rose 1.7%, according to data and analytics firm STR. The continent trails just South America, which grew 29% last year. Still, many African markets are notorious for issues with land rights, slow construction progress and graft.
“These hotels tend to take so much longer,” said Mark Martinovic, president and chief executive of Hotel Spec International Inc., a South Africa-based hotel-development consulting firm. He cited challenges in getting raw materials through customs in the continent's ports, saying, “I call the [African hotel] pipeline the 'pipe dreams.' ” But many of the world's biggest names in hospitality say that despite the enduring challenges for investors, the continent's growth prospects are strong.
Accor, which has over 140 hotels across 22 countries continent wide — including more than 60 in Sub-Saharan Africa — in July unveiled a $1 billion investment fund with Katara Hospitality, a global hotel developer and operator owned by Qatar's government, to help expand its footprint through acquisitions and organic growth. Accor plans to open 60 new properties in Africa by 2023. Accor operates brands that include Fairmont, Sofitel and Pullman.
“It's all about political and economic stability,” said Mike Collini, Hilton's vice president of development for Sub-Saharan Africa. “If you look at Africa over the last three decades, it's become significantly more politically stable.” Hilton, which is opening its first hotels in Botswana, Uganda and Eswatini, formerly Swaziland, this year, plans to more than double its footprint on the continent in the next five to seven years, from more than 40 hotels currently. Last year, the hotel operator opened a DoubleTree by Hilton in Pointe-Noire, Republic of Congo, and entered Zambia.
In West Africa, Marriott plans to expand its footprint by 75%, or nine hotels, by the end of 2023. Radisson Hospitality AB is also keen on the region, with plans to expand its nearly 100 hotels in operation and under development across 32 African countries to 130 hotels by the end of 2022.
“Governments and businesses from all around the world are rushing to strengthen diplomatic, strategic and commercial ties with Africa, which has created vast opportunities,” said Andrew McLachlan, Radisson's senior vice president of development for Sub-Saharan Africa.
Home-sharing company Airbnb Inc. has also expanded significantly across the continent, notching up listings in every African country. The continent accounts for three of Airbnb's eight fastest-growing markets world-wide. The dominance of Western brands stands out even in economies that have built strong trade relationships with China, Africa's largest investor, as China's vast infrastructure projects pave the way for many new hotel plans.
But Chinese hospitality giant Jin Jiang International (Holdings) Co. is gaining ground. The company bought Louvre Hotels Group, which operates over two dozen hotels on the continent, in 2015 and led a consortium that acquired Radisson last year.
Status of chain-hotel rooms in development pipeline
Note: 13 countries in Sub-Saharan Africa have no pipeline hotels reported
Source: W Hospitality Group, latest annual survey of 41 regional (African) and international hotel chains compiled from data on signed deals provided in early 2018
BY ALEXANDRA WEXLER